You call this health care, Mr. President?
By Lee Russ
Wednesday, January 24, 2007 at 06:29 PM
Okay, he really did make the health insurance tax deduction proposal in the state of the union. Even though the White House leaked the idea early, and just about every sane analyst said it won't solve the problem, and pretty certainly will create another problem.If you missed it, or just got so nauseous that you put it out of your mind, here's the president's "groundbreaking" health insurance tax deduction proposal, verbatim from the transcript of the state of the union speech:
Tonight, I propose two new initiatives to help more Americans afford their own insurance. First, I propose a standard tax deduction for health insurance that will be like the standard tax deduction for dependents. Families with health insurance will pay no income or payroll taxes on $15,000 of their income. Single Americans with health insurance will pay no income or payroll taxes on $7,500 of their income. With this reform, more than 100 million men, women, and children who are now covered by employer-provided insurance will benefit from lower tax bills.
At the same time, this reform will level the playing field for those who do not get health insurance through their job. For Americans who now purchase health insurance on their own, my proposal would mean a substantial tax savings -- $4,500 for a family of four making $60,000 a year. And for the millions of other Americans who have no health insurance at all, this deduction would help put a basic private health insurance plan within their reach. Changing the tax code is a vital and necessary step to making healthcare affordable for more Americans.
My second proposal is to help the states that are coming up with innovative ways to cover the uninsured. States that make basic private health insurance available to all their citizens should receive federal funds to help them provide this coverage to the poor and the sick. I have asked the Secretary of Health and Human Services to work with Congress to take existing federal funds and use them to create "Affordable Choices" grants. These grants would give our nation's governors more money and more flexibility to get private health insurance to those most in need.
There are many other ways that Congress can help. We need to expand Health Savings Accounts ... help small businesses through Association Health Plans ... reduce costs and medical errors with better information technology ... encourage price transparency ... and protect good doctors from junk lawsuits by passing medical liability reform. And in all we do, we must remember that the best health care decisions are made not by government and insurance companies, but by patients and their doctors.
Now, this immediately raises such important questions as:
- What qualifies as "health insurance" to make you eligible for the deduction? If you buy a super-cheapo Catastrophe plan, and pay $1,000 a year, will you qualify for the 7,500/15,000 deduction?
- When he says "the Secretary of Health and Human Services [will] ...work with Congress to take existing federal funds, exactly what "funds" are they? Are they being taken from some other program to fund this one?
1. Many, many people will not save enough money from the tax deduction to pay for the purchase of a real, primary coverage health insurance plan.
First, you have to keep in mind that, although not described in the speech, the president's plan calls for employees to be taxed on the value of the health insurance coverage they receive through employment. If you get $6,000 of health insurance free of charge, your income just went up by $6,000. So your $7,500 deduction doesn't get you a lot of advantage.
Second, if you have no employment-related coverage and choose to buy your own, expect a minimum or $3,000 to $4,000 for a single coverage policy. Minimum. And if you only earn $25,000, how much will you save by not being taxed on $15,000 of that? Probably not enough to pay for the policy. And if you really have a low income, say federal minimum wage on up through $12,000, I don't think there's any way that the tax deduction will pay for your policy.
2. As employees get taxed on the value of health insurance benefits, both employer and employee have far less incentive to participate in employee health insurance plans. Over time, expect health insurance to return to the private market mechanism, which is, I suspect, exactly what Bush wants. That takes the burden of the insurance off employers, with the political cover of employees now supposedly able to purchase the insurance on their own.
Except they pretty much won't be able to afford it (see number 1, above). Not to mention that this unaffordability will grow, if offshoring continues to eat away at good paying jobs, and the economy replaces the lost good jobs with crappier, lower paying jobs.
All of which would eventually shift a large portion of Americans over to the health care for the poor, provided by....government. And as more and more people get their health care that way, the argument grows on the right that the government simply can't afford to keep these benefit programs going. So benefits dwindle, eligibility gets tightened, and, eventually, most of us end up where the rich would like us to be: on our F'ing own, without the resources to make that work.
Congratulations, Mr. President, another fine example of thinking outside the box. The box of fairness and compassion.